ACAS: The Cost of Conflict in The Workplace
A new report from ACAS shows that the cost of conflict in the workplace can be significant and take many and varied forms, both open and hidden. An awareness not just of the problem but of its scale will help employers to realise that while conflict is inevitable, how it is handled when it arises can make the difference between retaining a valued employee and having to fill an unexpected vacancy, with all the costs that entails.
The report’s statistics show just how significant the cost of conflict can be - £28.5 billion, which is more than £1,000 per employee.
The ACAS report outlines three key points:
Conflict competence is a key element of good management and it positively affects organisational effectiveness and performance.
There is a critical time to intervene in a workplace conflict. This is before it reaches formal workplace procedures such as disciplinary hearings. After this point, resignations, presenteeism and sickness absence all increase.
Although conflict can be damaging to both people and businesses, it can also serve as a prompt to create fairer and more inclusive workplaces, but only if the right questions are asked and the way things are done is challenged and examined as a result.
The report made several key findings, which make for interesting reading:
Extrapolating from a 2018/19 CIPD survey, it is estimated that as many as 9.7 million employees experienced conflict in that period.
Of the employees who experienced conflict, only 5% resigned as a result. 9% took time off for sickness absence. 40% said their motivation had been reduced as a result and over half said that they had experienced stress, anxiety and/or depression because of the conflict.
ACAS estimates that the number of annual resignations due to workplace conflict runs at an average of 485,500.
The cost of recruiting replacement employees is £2.6 billion a year, while the cost of lost output as those new employees get used to their jobs is estimated at £12.2 billion.
The cost of sickness absence for the 874,000 who take it each year as a result of workplace conflict is estimated at £2.2 billion, borne by their organisations.
The phenomenon of presenteeism, where employees suffering from stress, anxiety or depression because of conflict continue to work significantly affects productivity with an estimated annual cost of anywhere between £590 million and £2.3 billion.
20% of employees involved in conflict take no action in response, while about a quarter discuss the issue with the other party to the conflict. About half of all employees involved discuss the matter with their manager, HR or trade union representative. It’s estimated that informal discussions may cost businesses somewhere in the region of £230 million a year.
Workplace mediation, either internal or external is effective at resolving conflict; three quarters of those who participated in it said their mediation had been successful. However, this came at a cost to businesses of £140 million and the take-up of mediation is very low in comparison to the number of disputes reported.
Very nearly 375,000 formal grievances are raised each year. The average cost in time spent by management dealing with each formal grievance is £951, meaning that grievances cost the economy about £356 million.
About 1.7 million formal disciplinary cases take place in UK businesses each year, with the average cost of a case being £1,140. This means the cost to the economy is about £2 billion.
On average, 428,000 employees are dismissed each year and it costs businesses about £13 billion to replace them.
In 2018/19, it’s estimated that over 135,000 Early Conciliation notices were submitted, indicating that the applicant intended to pursue an employment tribunal claim. Dealing with potential and actual litigation is believed to cost management £282 million in lost time, with an additional £264 million going on legal fees. Compensation to be paid by employers amounts to approximately £225 million.
Most of the costs connected with conflict arise towards the end of the employment cycle – whether this be resignation or dismissal. Any costs that arise in the early stages of conflict are low by comparison; they only start to rise if employees carry on working while ill or take time off due to sickness.
What does this mean for employers?
Effective and early resolution designed to build positive employment relationships can have a very significant return on investment. Conflict costs more where employees do not engage with their managers, HR or union representatives. Where conflict spirals into the formal procedure stage, costs can be up to three times as high as would be the case with informal resolution.
Much greater emphasis is needed on repairing employment relationships if conflict arises, and taking early action to address capability and performance issues is also important. Approaches to the disciplinary process that focus on learning and avoid blame need to be considered and adopted. This will, however, require managers to possess, or be trained to have, the necessary skills.
rradar Employment solicitor Amy Pedersen-Young says:
“The ACAS report highlights to us the costly nature of conflict within the workplace. This isn’t just a financial cost but also time spent on dealing with issues particularly when formal procedures are used. Conflict and issues within the workplace are inevitable; not much can be done to avoid some issues arising even with the best policies and procedures in place. Businesses and organisations should consider carefully their informal approaches and have a strategy in place to try and resolve problems at the earliest possible stage. Even dealing with what may seem a minor issue early on can save a lot of time and money further down the line. Engagement with employees should be encouraged, and a culture should be nurtured to allow people to feel that they can raise any issues they may face in their working day and that they will be dealt with quickly and fairly.”